Answer to Question #154330 in Management for Prabhdeep

Question

Role of Value Engineering in target costing

Answer 1

By definition, Value engineering is an organized effort directed at analyzing designed building features, systems, equipment, and material selections for the purpose of achieving essential functions at the lowest life cycle cost consistent with required performance, quality, reliability, and safety.In the target costing approach, a company sets the price and then deducts a reasonable profit margin. Value engineering allow the company to optimize its processes and achieve this target cost. Companies may establish target costs for external suppliers as well as internal processes and use value engineering to meet these targets.